Medical Debt on Credit Reports: A Battle Between Federal and State Regulations

As the federal government takes steps to undo recent regulations that prohibited the inclusion of medical debt on credit reports, states are fighting to preserve consumer protections. This battle has significant implications for Americans struggling to pay health care bills, affecting millions of people who face higher interest rates, reduced access to loans, and increased difficulty in renting apartments or finding employment. About 14 million people, or 6 percent of adults, owed more than $1,000 in medical debt in 2021.

Key Takeaways:

• The Trump administration is seeking to override state laws that restrict the inclusion of medical debt on credit reports, arguing that federal credit reporting law overrides state regulations.
• Fifteen states have passed laws in recent years restricting the inclusion of medical debt on credit reports, with three-fourths of voters in a recent survey supporting such protections.
• The Consumer Financial Protection Bureau has issued guidance saying Biden-era guidance on medical debt was "wrong" in concluding that states can regulate the use of medical debt in credit reports.
• The consumer bureau's action may invite court challenges to state laws, said Ted Mermin, executive director of the Center for Consumer Law & Economic Justice.
• The Consumer Data Industry Association applauded the consumer bureau's action, stating that there should be "one national standard" to govern how information is provided to the credit bureaus.
• The industry is "keeping all options open" at this time, said Benjamin Corb, a spokesman for the Consumer Data Industry Association.
• Consumer advocates, such as Allison Sesso of Undue Medical Debt, have expressed disappointment at the new guidance, but caution that nothing has changed yet and that states "should and will" fight any challenges to their laws.

Statistics:

• About 14 million people, or 6 percent of adults, owed more than $1,000 in medical debt in 2021, according to a KFF analysis.
• The Consumer Financial Protection Bureau said that medical bills in credit files decreased by the share of Americans with unpaid medical bills in 2024, after credit bureaus voluntarily removed medical debts under $500 from credit reports.
• A recent survey found that three-fourths of voters want their state to pass laws that would protect people from medical debt.
• Fifteen states have passed laws restricting the inclusion of medical debt on credit reports.

Sources:

• KFF, analysis of medical debt in the US (2021)
• Consumer Financial Protection Bureau, guidance on medical debt and credit reports (2024)
• The New York Times, article on medical debt on credit reports (2024)
• Consumer Data Industry Association, press release on the need for a "one national standard" (2024)
• Undue Medical Debt, survey on voter support for medical debt protections (2024)
• Center for Consumer Law & Economic Justice, analysis of the impact of medical debt on credit reports (2024)